Separation Agreements

Published date30 November 2022
Subject MatterCorporate/Commercial Law, Contracts and Commercial Law
Law FirmEfraim Weinstein Law Offices
AuthorHanan Efraim and Tsippy Bengi

Abstract

Upon the termination of agreements that conclude complex and extended relationships, such as: management agreements, licence agreements, complex rental agreements, complex distribution agreements, etc., a need arises to explicitly define the rights and obligations of the parties at the time of the termination of the relationship and, of course, for the period beginning after such termination.

The objective of separation agreements is to manage the termination of the relationship between the parties, including the arrangement of payments, rights and obligations of the parties, even in cases where, in light of the complexity of the relationship, these were not addressed under the contract.

Separation Agreements - When Will They Be Used?

Relational contracts are lengthy contracts that regulate complex relationships between the parties. In contrast to isolated contracts (sometimes also called 'transaction contracts'), which regulate short and specific relationships, such as sales agreements, etc., relational contracts regulate long-term relationships in which the rights and obligations of each party are detailed with a long-term view of the future, and will naturally have a broader scope.

Relational contracts are characterized by a complex and diverse relationships, and in many cases also by factual situations that will occur in the future that the original contract did not address at all. Hence, the contracts try to create a balance between the need for certainty and predictability and the need for flexibility and the ability to adapt to changing conditions. The criteria that are determined between the parties specify the distribution of risks as well as establishing an agreed solution regarding the continuation or termination of the relationship between the parties.

Examples of relational agreements are commonly of parties who regulate their rights and obligations in a wide variety of actions, such as: management agreements, long-term property lease agreements (complex buildings, hotels, etc.), operating agreements, licence agreements, distribution agreements, agency agreements and more. These are agreements that regulate complex relationships that refer to the many areas in which the parties operate, and relate to a period of many years.

For further reading, see the judgment of President (retired) Aharon Barak in Civil Appeal Leave 1185/97 The Heirs and Estate Administrators of the late Milgrom Hinda v. Merkaz Mash'an et al (published on 6.9.98).

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